Tellurian market commentary for July 8, 2020

NATURAL GAS

Henry Hub
Day change: $0.052, down 2.8% | Settle: $1.824 | August 2020

Waha Basis
Day change: UNCH | Settle: -$0.349 | August 2020
Low point on curve: -$0.768 | October 2021

TTF
Day change: $0.079, down 3.9% | Settle: $1.938 | August 2020

JKM
Day change: $0.005, down 0.2% | Settle: $2.190 | August 2020

Cryo-spread*
Day change: lower | Settle: -$0.170 | August 2020

• BP, Cheniere, and JERA officials all expressed concern today that a $2 Asian gas price would not be sustainable for the growth of the global gas industry...
• ...JERA's Hitoshi Nishizawa stated that such low prices will make it difficult for the development of new LNG supplies...
• ...others on the Japan LNG & Gas Virtual Summit panel stated that LNG prices will need to stay within a band that allows both buyers and seller to be happy
• As if there wasn't already enough reasons for European coal-to-gas switching, carbon prices are surging in the EU, providing gas with a stronger edge for power...
• ...as pointed out by Bloomberg analysts, coal-power margins (dark spreads) have plummeted to the lowest levels in the last decade
• SK E&S is considering a minority stake in ENN's Zhoushan LNG terminal, located in China's eastern Zhejiang province, per an SK spokesperson...
• ...the equity stake is reportedly a part of a broader SK strategy to secure a market outlet in China for its LNG supply
• Elba Island LNG continues to slowly inch towards full operation as Kinder Morgan received FERC approval to introduce mixed refrigerant into unit 9 at the Elba facility
• COVID-19 has truly made a dent on Japan's LNG demand according to one JERA executive officer who participated in today's Japan LNG & Gas Virtual Summit...
• ...Japanese buyers have been deferring shipments while lowering volumes from suppliers and cancelling U.S. cargoes and diverting others into the spot market...
• ...Bloomberg goes on to report that the JERA officer stated he didn't have a "good view" on Japanese LNG demand for the remainder of 2020 given the uncertainty

*The Cryo-spread is calculated by subtracting the NYMEX Henry Hub price from the premium LNG netback to the U.S. Gulf Coast.

 

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